Walgreens plans to close more of its approximately 8,700 stores in the United States, the parent company said Thursday. The drugstore giant reported third-quarter earnings that were lower than analysts expected.
The pharmacy chain also cut its profit outlook for the year, citing worse-than-expected consumer spending.
“We continue to see pressure on the American consumer,” Tim Wentworth, CEO of Walgreens Boots Alliance, told investors during an earnings call on Thursday. “Our customers have become increasingly selective and price-sensitive in their purchases.”
Since February, Walgreens has closed 625 U.S. stores. The company did not specify how many additional stores it would close as part of its “major multi-year” cost-cutting program. But about a quarter of the pharmacy chain’s U.S. stores — which the company does not view as critical to its long-term strategy — could be affected, Mr. Wentworth said.
The company’s shares, which fell more than 20 percent on Thursday after its earnings report, ended the day down about 22 percent. They are down 54 percent this year.
Walgreens said it saw signs of pressure, particularly on lower-income consumers, driven by high inflation and depleted savings. Last month, on the heels of a similar move by Target, Walgreens said it would cut prices on more than 1,300 products in response to sluggish consumer spending.
The company’s leadership has been in flux over the past year. Mr. Wentworth joined the retailer’s parent company in October as the drugstore operator struggled with slowing demand at its retail locations and after its previous CEO stepped down in September.
Neil Saunders, managing director of GlobalData Retail, said in an emailed commentary that Walgreens’ own strategic decisions, not just consumer behavior, were also to blame. He said the retailer should have invested more heavily in private-label products to drive sales in a value-conscious consumer environment.
“Walgreens is a company in a mess,” said Mr. Saunders. “It has not been run with focus in recent years and it now needs a huge injection of discipline to solve its problems.”
Brittain Ladd, an independent strategy and business consultant, also pushed back on Walgreens’ characterization of weak consumer spending as the main culprit. Walgreens sells products, such as household items, that consumers still buy, Mr. Ladd said.
He said the company should focus on improving customer experience in its stores and offer private label products for groceries and other essential items, rather than closing stores for profit.
“Walgreens comes up with one excuse after another to hide this brutal fact: Walgreens is terrible at retail,” Mr. Ladd said. “And that is really the Achilles heel of the company.” He also said that strategy at the executive level must change for the company to increase its profits.
Other major U.S. pharmacy chains have undergone significant restructuring in recent months. In October, Rite Aid filed for bankruptcy and announced plans to close 154 stores to help the chain save money on rent and improve its financial position. On Thursday, it asked a bankruptcy court to approve its restructuring plan to reduce $2 billion in debt.
Walgreens told investors it expected challenges in the pharmaceutical industry and for U.S. consumers to continue through fiscal 2025.
